As we approach the end of another selling year, emotions and stack rankings often get in our way, clouding our better judgment regarding deals. In efforts to secure a big win that will put us over 100% for the year, we’re often tempted to cut corners. Cutting corners, of course, often means cutting our prices in desperate attempts to push deals over the finish line. Cutting prices, though, literally and figuratively, has its costs. And desperation, in Q4 or at any time, is a brutal teacher that can cause major grief for selling organizations that abandon reasonable pricing strategies in the interest of winning. Winning at any cost. Emotion trumping reason. Need slaughtering sense.
Thomas Jefferson provided a wonderful quote – “In matters of style, swim with the current. In matters of principle, stand like a rock”. The Q4 selling paraphrase would be “In matters of pricing, stand like a rock”. Of course, at any time of the year, selling organizations strategically utilize pricing flexibility on significant pursuits. The key word is “strategically”. Flexibility as a planned element of pricing strategies makes all the sense in the world. But it’s the emotion and desperation that can cause “stand like a rock” to be replaced by standing on a very slippery slope.
When solid Q4 pricing strategies are abandoned with prices cut and margins surrendered, the positives of the resulting wins can be very short-lived as their negative consequences can quickly reverberate through selling organizations. For credibly pursuing large deals at any time involves significant investments. Consider a selling organization’s people, the human assets whose time is always valuable. When these scarce people are assigned to major pursuits, their talents are often unavailable to other efforts. Cutting prices wipes out healthy profits that typically offset a pursuit’s costs. Opportunity qualification, therefore, is never more critical than in Q4. As is being true to your pricing strategy. Let your competitors lower their standards. In matters of pricing, stand like a rock.
The negative consequences I mentioned of “buying the business” are long-lasting. Customers can often make end-of-the-year purchases at your slashed prices to stockpile your products, killing your future revenues at robust margins. And demand aside, lowering prices can reset client pricing expectations that can be very difficult to change. Devalued products very often stay devalued. And in the “be careful what you wish for” category, bidding low often results in lukewarm victories that burden your organization’s future. Nasty, one-sided contracts with bloody margins can cripple organizations. And if you join the distasteful price wars with your competitors, beware of the race to the bottom. You just might win.
Outside of utilizing stringent opportunity qualification as the selling year wanes, what can you do to increase your chances of winning Q4 business without giving away the store? Creativity rules. Consider exploring alternative payment terms or bundling offerings. What about other products/services to be delivered at the same time or in the future to enhance a deal in the eyes of the client to prompt signature? Of course, understanding your account’s pains is mandatory. How about co-bidding with partners to form customized advantages for accounts in need? Or adding consulting services to a proposal to differentiate and strengthen your bid?
Creativity drives wins. It can be done. I’ve often shared the classic tale of the Xerox 914 Copier, which debuted in 1959, many years before I cut my teeth in selling at The Big “X”. Industry pundits predicted that The 914 would change the very future of printing. But even with its amazing technology that produced clean copies on plain paper for the first time ever, big challenges loomed. The efforts of Xerox’s amazing sales force aside, prospects found paying $30,000 for 700 lb. machines troublesome and initial sales were slow. But Xerox creativity developed a pricing strategy that trumped the price objection. They simply stopped selling 914’s. Stopped selling them and started leasing them, a pricing strategy change that produced historic success. Fortune would later say “the 914 is the most successful American product in history measured by ROI”. Thousands of new clients signed up for the reasonably-priced monthly $95 lease, which included 2,000 free copies, And Xerox revenues skyrocketed. But the real growth accelerator of the creative pricing strategy was the 4-cent per copy charge above the monthly allowance. For Xerox understood their prospects’ pains, making a calculated bet on human nature. They bet that office workers would quickly abandon the mess of carbons and coated paper for the cleanliness of plain bond paper. And they were right. Customers quickly flew past their monthly 2,000 copy allowances and just kept on copying and copying and copying. In fact, the average 914 customer copied more than ten times their allowance, with each additional copy generating that 4-cent charge, driving Xerox sales, revenues and incredible profits. In two years, the innovative strategy tripled Xerox revenues as customers somehow found room for 10,000 of those 700 lb. machines. Joe Wilson, legendary Xerox VP of Sales, called the pricing change “the best decision we ever made”.
So, make sure you understand your accounts comprehensively – in Q4 and all the year through. Stand your ground and don’t give away the store, remembering Thomas Jefferson’s sage guidance. Then, copy Xerox and put your creativity to work.